Gold prices were mixed on Monday morning but were back above the $4,200 level as expectations of a US interest rate cut weighed on the dollar ahead of this week’s Federal Reserve policy meeting.
Gold futures slipped 0.1% to $4,238.30 an ounce while spot gold rose 0.3% to $4,209.73 at the time of writing.
“Gold prices have recently returned to around $4,200 per ounce, underpinned by increased risk aversion and growing expectations of a 25bp rate cut by the Federal Reserve (Fed) at its 9-10 December meeting,” HSBC analysts wrote in a note.
“The recent weakness in the broad USD − reflected by the US Dollar Index falling below 99 − has further supported gold prices, given their typically inverse relationship.
Read more: FTSE 100 LIVE: Stocks steady as investors look ahead to Fed interest rate decision
“However, with markets having largely priced in the anticipated rate cut, any subsequent decline in the USD is expected to be modest. While gold’s upward momentum remains intact, our precious metals analyst notes that a lack of improvement in physical demand may constrain further near-term gains.”
According to CME’s FedWatch tool, markets are pricing in an 87% chance of a 25 basis point cut at the Fed meeting on 9 and 10 December after the release of weaker economic figures and dovish comments from several officials. Lower interest rates tend to support demand for non yielding assets such as gold.
“We still look for more rate cuts next year, which should push gold to $4,500 an ounce next year,” said UBS analyst Giovanni Staunovo..
As of 5:44:05 GMT-5. Market open.
Oil prices held near two week highs on Monday as investors bet that an expected US Federal Reserve rate cut this week will support economic growth and energy demand while also tracking geopolitical risks that could disrupt Russian and Venezuelan supply.
Brent crude (BZ=F) futures lost 0.7% to $63.32, while West Texas Intermediate (CL=F) retreated by the same margin to $59.67.
“The market is in a wait and see mode” ahead of further news on US interest rates and Ukraine peace talks, Tamas Varga, oil market analyst at PVM, told Reuters. “If there’s any kind of agreement reached in near future on Ukraine, then Russian oil exports should increase and put downward pressure on oil prices,” he added.
Progress on peace talks in Europe remains slow, with disagreements over security guarantees for Kyiv and the status of Russian held territory still unresolved. US and Russian officials also remain divided over the peace plan put forward by the administration of US president Donald Trump.
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